Shopping Habits: Avoid the Supply Chain Breakdown

Knowing consumers’ holiday purchasing habits could have prevented UPS’s inability to deliver packages on time for Christmas. Recognizing on-line sales continue to increase, especially when retailers frequently offer the best deals right before Christmas, UPS should have taken their own advice and increased both their air and ground fleets to accommodate the surge of packages needing last minute delivery.

Unexpected spikes in demand can play havoc with supply chains. Even if suppliers can produce enough products for customers, the logistics system in place cannot always deliver them. Often, last-minute transportation, such as aircraft charters or express-air freight services, can be expensive. One viable answer is to have a logistics backstop that is available at short notice and at a reasonable cost.

Instead, many customers felt frustration and disappointment when viewing the empty spaces underneath the Christmas tree.

Procrastination’s Reward à Good Deals

Why do consumers procrastinate? Although that may be the true shopping habit of some individuals, many consumers have learned retailers often discount items or offer great deals at the last minute. Between November 1st and December 24th, overall sales of holiday items rose a modest 2.3% from 2012. However, the last shopping weekend before Christmas of 2013 had web sales jumping 37%. Monday, December 23rd, alone showed an increase of 63% in on-line orders from the previous year.

Not only are there great deals to be had the later a customer purchases, most retailers extended the purchasing deadline for guaranteed delivery; some as late as 11 p.m. on Monday, December 23rd. Combine the increase of web sales, the best discounts, and the extended purchasing deadline and you get the recent UPS fiasco.

What does this mean for the holidays of 2014? Hopefully, consumers recognize they were part of the problem – that those last minute deals are great for the pocketbook but the demand it places on shippers like UPS or FedEx may mean a late delivery.

The Good Deal’s Downside

Of course UPS is just as culpable (if not more so) than their customers. UPS does not work in isolation. With significant retail partnerships – Amazon, Toys R’Us, etc. – UPS allowed the extension of on-line holiday purchasing deadlines. Transporting 50% to 60% of e-commerce orders places an enormous responsibility on UPS, and they should have been prepared for the last minute holiday surge; especially when they prides themselves on efficient logistics. Watch UPS’s logistics commercial. However, even with their extra charted aircraft contingency, they could not handle the spike in volume. They may have deployed those extra planes on Monday and flown twice as many flights on Christmas Eve, but it wasn’t enough – those packages failed to make it to the final leg of their journey – the delivery truck.

Prevention

What should UPS learn from their recent failure? That maybe they’re not as good at supply chain management as they thought. They may have invested time, effort, and money to streamline their process, but there was clearly a breakdown between retailer and logistics provider. There needs to be frank conversations held between the major retailers offering late deals and extended purchasing deadlines and their logistics partner – UPS.

Retailers must also have a clear grasp on their inventory – what they have in stock, how much they’ve sold during previous holidays, and a good idea of what they hope to sell during the current season. Conveying that information to the logistics partner is an integral part in making sure customers are provided for in a timely manner. The best way to do this, is to have an inventory management system in place.

Rather than offering more time for purchasing with guaranteed delivery, the burden should be placed on the consumer’s shoulders. Set an earlier deadline and charge for expedited delivery. Both retailers and UPS may find those procrastinating consumers are more than willing to pay for an on-time delivery.

Alternatively, re-evaluation of the retailer/logistics partnership may lead to new shipping methods. For example, Amazon is turning to the U.S. Postal Service. A new partnership has been created to provide Sunday home delivery – this is already happening in New York and Los Angeles with plans to extend the service to Dallas, Houston, New Orleans, and Phoenix.

Ultimately, consumers, retailers, and logistics partners must accept responsibility for the roles each played in the Holiday 2013 delivery failure and adjust their future behaviors accordingly.

Were you personally impacted by the Holiday 2013 delivery fiasco? Tell us about it in the comments.

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Paul Trujillo

Paul Trujillo is a Product Marketing Manager at Informatics specializing in Inventory Warehouse Management and Supply Chain product lines. His nearly 15 years of experience has put him at the forefront of industry technology and developing trends.

My kids were missing a few less presents as a result of the shipping issues and or stock levels. I ordered what was stated on website to be in stock and on hand; with plenty of time to spare. I did not receive the items until after the holidays. By then it was too late to purchase the items locally. I agree that the infrastructure should be updated to accommodate.